Best bond investment in India

Posted by Scale Rich on October 1st, 2022

India is a land of interesting investment choices. Conservative options are always preferred in India with the Indian household holding more than 25,000 tonnes of gold and FDs and savings accounts still being the favorite choice of investment. But one common problem with conservative investment options is that it rarely beats inflation. Inflation is the phenomenon where the value of money you hold loses its value every year. When your interest rate is lower than the inflation rate, you may end up with a loss. 

Bond investments are a good option here for conservative investors. But what are bonds? And what are the best bond investment in India? Let us find out. 

What are bonds?

A bond is a debt instrument. It is issued by an entity when they are in need of money. This money is raised directly from investors instead of opting for a bank loan or an equity raise. 

Bonds are sold as units. A certain number of units consists of a lot. In most cases, you are required to buy at least one lot. The money you pay to buy a lot is the money that you lend to the entity that issues the bond. For the money you borrow, you will continue to receive a fixed interest payment. Every bond has a maturity period. The interest payment will continue till this maturity period. Once the bond matures, the initial deposit amount will be distributed back to the investor in most cases. 

What makes bond investment a wise option is its conservative nature and predictability. There is the least amount of risk associated with buying a bond since it is not market-linked. The risk can be compared to that of a fixed deposit. Furthermore, bond investments are highly predictable making planning easy too. 

Best bonds to invest in 

Bond investments can be categorized as two broadly - government bonds and private bonds. Which among these two works for you will depend on your investment horizon and preferences. Let us understand both first to make it easier for you to choose. 

Government bonds

Government bonds are issued by the government to raise money from the domestic market. Governments could need money for a lot of things - from infrastructure development to the growth of a particular government entity. The money raised through bonds is used for this. Most government bonds are handled by the Reserve Bank of India.

Corporate bonds

Corporate bonds are issued by different private entities. Similar to the case of government bonds, the idea is to raise capital. But instead of the government, a private entity is raising the money. 

Both government and corporate bonds come with low risk. Government bonds come with an even higher level of safety. But at the same time, corporate bonds could give you slightly higher interest rates. 

The choice between the two should be based on your goals and risk appetite. For instance, if your risk appetite is very low, then government bonds could work better for you. At the same time, if you can stomach the minute risk, corporate bonds could be better. 

G-sec Bonds

G-sec bonds are a manner for the authorities to elevate cash and traders to get respectable returns. The running of G-sec bonds is much like that of a normal bond. Here, the cash you make investments withinside the bond is the cash you're lending the authorities (or the authorities authority). For that quantity of cash, you'll preserve to acquire hobby bills until the cessation of the tenure. Here, the tenure may be distinct for distinct bonds. But, on the cease of the same, you'll additionally acquire the cash you invested.

Conclusion

Even after you have chosen between corporate and government bonds, there could be many options to choose from. What you require at that point is a platform where you can weigh all the options using simple yet powerful information. Scalerich is exactly what you need here. Sclarerich is a platform where you can understand and invest in bonds in the simplest way ever! Login to Scalerich to start your bond investment journey today!

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Scale Rich

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Scale Rich
Joined: September 29th, 2022
Articles Posted: 6

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